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23rd June 2016 is set to mark an iconic event in the history of United Kingdom (UK). UK will be voting on the referendum which will decide the fate of UK’s membership with the European Union (EU).

Refugees and more. The people of UK to speak out. Source: Tengrinews

The UK had joined the EU, previously referred to as the European Economic Community, in 1973. Ever since, there has been a debate whether the UK should continue being a part of the EU. The benefits of this membership was access to the markets of the member states, creating a ‘single market’. This single-market-access ensures that member-countries can freely move goods, services, capital and people across boundaries. This lowers the administrative costs borne by a company. This further facilitates growth of trade and investment across countries, giving a boost to the GDP of the countries. It is said that the UK’s GDP had doubled after it joined the EU. Nonetheless, the UK voted on whether it should continue with its EU membership in 1975. The result was positive – yes, continue the membership. Prior to the 2015 elections, the Conservative Party of the UK pledged to vote on this membership again through another referendum in 2016. To give this effect, the European Union Referendum Act, 2015 was passed. The debate arises – would the exit of the UK from the EU be a boon or bane for the country’s economy and international relations?

The supporters of Britain’s exit, referred to as the ‘Brexit’, are of the opinion that UK’s position will strengthen if it functioned solely. It would be easier for the government to regulate immigration. This has been an issue UK has been tackling since some time due to the influx in the number of immigrants settling in UK. Membership of the EU implies that the member states must incorporate most EU laws into their domestic laws. The Brexit supporters believe that an exit from the EU will ensure higher autonomy for the country in determining its own domestic laws without the interference from the other EU countries. UK can formulate its trade agreements independent of the influence from other nations, which it cannot freely do by being an EU member.

UK and EU Meant to fragment? Source: Bizmology

However, according to the Organisation for Economic Co-operation and Development (OECD)’s policy paper no.16 on The Economic Consequences of Brexit: A Taxing Decision, published in April 2016, UK’s exit from the EU will have a deep negative impact on the country’s economy. There will be a decline in the country’s GDP by approximately 6% by 2030. Trade and investments will take a strong hit. The biggest advantage of being an EU member is the access to the common market. The withdrawal of EU membership will give zero or limited access to this single market. It would be discouraging for present and future businesses operating or planning to invest in the UK from establishing and/ or expanding its business. It is likely that these companies may shift their trade base to other countries. A reduction in foreign direct investment will lower job opportunities for people living in the UK. President Barack Obama has warned the UK from exiting the EU, as it would not be beneficial for its trade relations with the other EU member states as well as with the US. It is predicted that the relations between the UK and other EU states may get strained, weakening trade relations. New trade agreements will need to be signed with other states from scratch. According to the OECD Secretary-General Angel Gurría “Leaving Europe would impose a Brexit tax on generations to come. Instead of funding public services, this tax would be a pure deadweight loss, with no economic benefit.” According to the UK Treasury analysis, the tax receipts of the country would be 36-billion pounds lower each year, 15 years after exiting the EU.

The UK may decide to follow countries like Norway, Switzerland or Canada, which are not members of the EU but have agreements with it for trade purposes. However, the downside of these kind of models is that, they have had to incorporate EU laws into their own domestic laws in order to have access to the single market. However, being a non-member, these countries do not hold the right to vote on these laws.

These issues give rise to the question whether the benefits of exiting the EU outweigh the negative impact? Proponents of the argument that UK’s independent operation will strengthen the country’s sovereignty does not have substantial merit. Each country joins international organisations with the intentions of promoting socio-economic betterment for all members. This does not question the state’s sovereignty in any way. It should also be considered, whether it would be justified for the UK to singly vote on this issue? Being a member of the EU, each country is as good as a stakeholder in the other member state’s economy. An exit from the EU would not only impact the UK but also other member nations. Would it be justified to not provide these countries with an opportunity to vote on this referendum? The speculation surrounding this referendum has already been a factor in slowing UK’s economy by 0.4% in the first quarter of 2016. It is to be seen what will UK decide in June and the impact this decision will have on UK and the rest of EU.

Surabhi Shekhawat is a Master of Laws (LLM) student at the London School of Economics & Political Science. She has completed her LLB from Government Law College (GLC), Mumbai. Prior to this LLM, she has practiced as a tax lawyer in Mumbai. Surabhi has been an active participant with socio-legal projects as the General Secretary of the Legal Aid Committee of GLC and the Maharashtra State Commission for Women. Presently, she is the Pro Bono Officer of LSE's LLM Committee. She is interested in exploring and debating on current global legal issues, especially those relating to India. She aims to express these through the Initiative for Policy Research & Analysis.